LMIR – OCBC
OUTLOOK REMAINS HEALTHY
• Demand likely to stay sturdy
• Strong contribution from new additions
• No immediate refinancing needs
Demand for retail malls/spaces to remain strong.
We remain positive on Lippo Malls Indonesia Retail Trust’s (LMIRT) financial performance in 2012. Retail sales in Indonesia have been treading along a positive trend line since 1Q11, based on survey by Bank Indonesia. In Jakarta and Medan where the most of LMIRT’s retail malls/spaces are located, we note that Oct retail sales accelerated by 41.1% and 22.3% YoY respectively, following Sep sales growth of 26.1% and 16.3%. While the Consumer Confidence Index in Nov eased slightlyby 1.6% MoM to 114.3, respondents were still optimistic that retail sales in 1Q12 are likely to remain high. As such, we believe the demand for its retail malls/spaces is likely to remain healthy.
Recent acquisitions to drive growth.
LMIRT had also recently announced the completion of acquisitions of Pluit Village and Plaza Medan Fair. We expect these new additions, which collectively make up around 26.3% of its portfolio NLA, to contribute significantly to its rental revenue in 2012. According to management, the investments are likely to boost its distributable income by 61% from S$47.9m seen in FY10, while its adjusted DPU yield would increase to 8.43% from 8.38%. We view this positively as the acquisitions were expected to be DPU yield accretive and were done at a discount of 4.1-5.7% to their average valuations.
Maintain BUY.
LMIRT is also in a comfortable position for further growth opportunities. We estimate that its aggregate leverage will remain fairly unchanged at around 10% post acquisitions, giving it ample funding capacity for future investments. Moreover, LMIRT has successfully refinanced its bank borrowings due 26 Mar with a drawdown of S$147.5m under its new loan facility arrangement. With the debt due for repayment only in Jun 2014, LMIRT has no immediate refinancing requirements over the next year. We maintain our BUY rating and S$0.45 fair value on LMIRT.
CCT – BT
Partners may loan up to $794m for Market Street Car Park project
They are CapitaLand, CapitaCommercial Trust and Mitsubishi Estate Asia
UP to $794 million of funding for the redevelopment of Market Street Car Park could be provided via a unitholder loan from its project partners CapitaLand, CapitaCommercial Trust (CCT) and Mitsubishi Estate Asia (MEA).
CapitaCommercial Trust Management said yesterday that the unitholder loan will be drawn down in multiple tranches over time, with interest pegged to market rates on the relevant dates of drawdown.
CapitaLand, CCT and MEA are redeveloping Market Street Car Park for some $1.4 billion. Their respective interests in the joint venture are 50 per cent, 40 per cent and 10 per cent.
Assuming that $794 million of unitholder loan is drawn down in one tranche, with a loan tenure of four years, the estimated total interest expense for the loan will be $100 million.
CCT’s proportionate share of the unitholder loan would be $317.6 million, and its share of the estimated interest expense payable would be $40 million.
Separately, CCT’s manager also said that CapitaLand has agreed to renew its lease at Capital Tower, a property in CCT’s portfolio. The current lease expires in July next year and the new one will run for three years from July 2012, with an option to renew for another three years on terms to be determined. The lease consideration is about $7.7 million.
Because CapitaLand has a deemed interest of 32 per cent in CCT and is a controlling unitholder, the lease deal is seen as an interested person transaction.
CCT’s manager believes that the lease consideration is fair and reasonable, saying that CapitaLand has been prompt in its rental payment and the lease will help generate a stable income flow.
Independent valuer CB Richard Ellis also found that the rental rate for the lease is ‘at market level’ and the other terms are consistent with normal commercial terms.
Meanwhile, CapitaLand announced that its joint venture with CapitaMalls Asia (CMA) and Singbridge Holdings has incorporated a 100 per cent-owned project company in China with a registered capital of $377 million. The partnership won a site in Chongqing for the development of a mixed use project.
In another development, CMA said that its wholly owned subsidiary Chengdu Huayun Jiangnan Real Estate Development, which holds CapitaMall Tianfu in Chengdu, has increased its registered capital by over $58 million to $170.54 million.
Fortune – BT
Fortune Reit hires ANZ, DBS and Stanchart for loan
FORTUNE Real Estate Investment Trust (Reit) hired Australia and New Zealand Banking Group Ltd (ANZ), DBS Bank Ltd and Standard Chartered plc (Stanchart) to arrange and underwrite a HK$1.4 billion (S$233 million) three-year loan, according to a person familiar with the matter.
The three banks will begin marketing the facility to other lenders in January, said the person.
The loan comprises a HK$1.1 billion term loan and a HK$300 million revolving credit facility and pays a margin of 200 basis points over the Hong Kong interbank offered rate, according to a filing with the Hong Kong stock exchange. Proceeds of the term loan are for Fortune Reit’s intended acquisition of two retail properties in Hong Kong, Belvedere Garden Property and Provident Centre Property, purchased for HK$1.25 billion and HK$650 million respectively, according to the statement. The loan is secured by rentals, deposits, and proceeds from properties.
Fortune will also use an existing revolving credit facility of HK$970 million due 2016 to fund the acquisitions. That facility pays a margin of 91 basis points more than Hibor, according to data compiled by Bloomberg. ANZ, DBS and Stanchart were bookrunners on the existing HK$970 million facility, said the person yesterday.
Fortune has the equivalent of US$489 million in loans maturing before the end of 2016, according to data compiled by Bloomberg. — Bloomberg
PCRT – BT
PCRT seals lease deal with Shanghai Summit
Contract value for mall lease totals 94.1m yuan over 2.5 years
MAINBOARD-LISTED Perennial China Retail Trust (PCRT) said yesterday that it has leased out parts of its Shenyang Longemont Shopping Mall to Shanghai Summit Group for a total contract value of 94.1 million yuan (S$19.2 million).
The lease agreements cover a total of 57,028 square metres of retail space at Shenyang Longemont Shopping Mall, and will be leased for the purposes of operating an indoor rooftop theme park, indoor ice-skating rink, a supermarket, a Yes Sir Coffee and several other food and beverage outlets.
The lease agreements are for two-and-a-half years, until June 30, 2014, with renewal at the lessor’s option and subject to terms and conditions to be agreed by both parties.
PCRT, which was listed here in June this year, owns half of the mall.
According to PCRT’s trustee- manager, Perennial China Retail Trust Management, the lease agreements and forward renewal terms with Summit will ensure long-term sustainable and stable income for the trust.
The lease agreement with respect to the indoor rooftop theme park and indoor ice skating rink is for a monthly rent of 1.15 million yuan and 132,632 yuan respectively, or 12 per cent of the month’s gross turnover, whichever is higher.
The lease agreement for the supermarket is for a monthly rent of 900,409 yuan or 4 per cent of the month’s gross turnover, whichever is higher.
The agreement for the F&B outlets is 888,023 yuan per month, from Dec 29, 2011 to June 30, 2013. From July 1, 2013 to June 30, 2014, a monthly rent of 947,586 yuan will be charged. Turnover rent is pegged at 13 per cent.
The lease agreement for Yes Sir Coffee is for a monthly rent of 55,967 yuan or turnover rent at the rate of 15 per cent, whichever is higher.
PCRT closed trading yesterday at 47.5 cents.
Fortune – BT
Fortune Reit eyes 2 assets for HK$1.9b
Purchases will raise gross rentable area of retail portfolio by 23%
FORTUNE Real Estate Investment Trust (Fortune Reit) is looking to acquire two retail properties in Hong Kong for a total consideration of HK$1.9 billion (S$319 million).
It expects the purchases to be yield-accretive. But it will need unitholders’ nod for the transactions, as its sponsor Cheung Kong and Cheung Kong associate Hutchison Whampoa have interests in the two assets. The relevant interested parties will abstain from voting.
Independent financial adviser CIMB has backed the proposed deals, saying that they are fair and reasonable, and in the interests of Fortune Reit and its unitholders.
The total consideration of HK$1.9 billion is below the respective valuations (as at Sept 30, 2011) of HK$1.98 billion and HK$2.02 billion by independent valuers Knight Frank and Savills.
Fortune will have to fork out another HK$49 million in fees and expenses for the acquisitions, raising the total cost of the acquisition to HK$1.949 billion.
Belvedere Garden Property at Tsuen Wan comes with a price tag of HK$1.25 billion, while Provident Centre Property at North Point costs HK$650 million. They will increase the gross rentable area of Fortune Reit’s retail portfolio by some 23 per cent to 2.4 million sq ft.
Fortune Reit has no plans to raise new equity – it will fund the HK$1.9 billion using both debt and internal funds. Its aggregate leverage, at 20.1 per cent as at Sept 30, is expected to go up to around 26.3 per cent immediately after the transactions.
Fortune Reit believes that there will be yield accretion from the deals. The two properties generated a net property income yield of 4.2 per cent for the year ended Dec 31, 2010 – higher than the yield of 3.9 per cent from its existing 14 properties.
It estimated that if it had owned the properties since Jan 1 this year, its distribution per unit for the six months ended June 30 would have been 6.7 per cent higher, at 13.66 HK cents.
But Fortune Reit needs unitholders’ approval to proceed with the deals, which involve interested parties. Cheung Kong’s aggregate indirect interest in the Reit is 31.3 per cent, and Cheung Kong also owns around 49.9 per cent of Hutchison Whampoa.
Fortune Reit will hold an extraordinary general meeting (EGM) on Jan 19 next year to seek unitholders’ consent for the acquisitions. It will also ask for authorisation for certain continuing connected party transactions between the Reit and parties linked to Cheung Kong or the Reit manager.
Independent financial adviser CIMB advised the independent board committee and audit committee of Fortune Reit’s manager to recommend that independent unitholders vote in favour of the EGM resolutions.
The transactions are at arm’s length and are on normal commercial terms, CIMB said. They are also fair and reasonable, and are in the interests of Fortune Reit, independent unitholders, and unitholders as a whole, it added.
Fortune Reit gained three HK cents yesterday to close at HK$3.77.